2011 (1) TMI 1153 - HC - Companies Law

Liquidation secured creditors - application filed by a secured creditor of the company in liquidation seeking a direction to the official liquidator to jointly advertise for the sale of the assets of the company - a company which supplied boiler to the company in liquidation seeking to exclude the same from the list of properties sought to be sold by the secured creditor Held that - applicant manufactured two sets of turbo generators and supplied them to the company in liquidation. The company had taken possession lawfully. The title in the goods had passed onto the buyer. Inasmuch as title as well as possession had passed on to the buyer the applicant herein has no right to claim any lien over the goods. As an unsecured creditor the applicant has only one remedy viz. to prove their claim before the official liquidator and wait in the queue objection of the applicant herein to the sale of the turbo generators supplied by them to the company in liquidation cannot be sustained and their applications under section 9 dismissed

Issues Involved:
1. Sale of assets of the company in liquidation.
2. Exclusion of specific assets from the sale.
3. Interim measures pending arbitration proceedings.
4. Objections to the sale process and the powers of the provisional liquidator.
5. Rights of secured and unsecured creditors.
6. Jurisdiction of the company court and the official liquidator.

Issue-Wise Detailed Analysis:

1. Sale of Assets of the Company in Liquidation:
The applicant, a secured creditor, sought a direction for the joint advertisement of the sale of the company's assets. The court emphasized that the provisional liquidator has the same powers as a liquidator unless restricted by the court. The court found no legal impediment to ordering the sale of the properties through the official liquidator. The applicant's request for fresh publication for the sale of assets was allowed, with specific instructions on the publication process, upset prices, and inspection dates.

2. Exclusion of Specific Assets from the Sale:
Walchandnagar Industries Ltd. sought to exclude a boiler supplied to the company in liquidation from the sale. The court noted that the title and ownership of the boiler had passed to the company, and the applicant had lost its lien on the boiler. Therefore, the request for exclusion was denied, and the applicant was directed to lodge its claim with the official liquidator as an unsecured creditor.

3. Interim Measures Pending Arbitration Proceedings:
Bharat Heavy Electricals Ltd. filed applications under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim injunctions against the sale of certain machinery supplied to the company in liquidation. The court found that the title and possession of the machinery had passed to the company, and the applicant had no lien over the goods. The applications were dismissed, with liberty to lodge claims with the official liquidator.

4. Objections to the Sale Process and Powers of the Provisional Liquidator:
Respondents raised several objections, including the limited powers of the provisional liquidator, pending applications to set aside the appointment of the provisional liquidator, and the claim that the applicant had given up its security. The court rejected these objections, clarifying that the provisional liquidator has the same powers as a liquidator, and the applicant had not relinquished its security by surrendering possession. The court also dismissed the objection regarding parallel proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.

5. Rights of Secured and Unsecured Creditors:
The court reiterated that secured creditors have the right to stand outside the winding-up proceedings and realize their security. The applicant, as a secured creditor, was entitled to seek the sale of the assets through the company court. The court also addressed the rights of unsecured creditors, directing them to lodge their claims with the official liquidator.

6. Jurisdiction of the Company Court and the Official Liquidator:
The court emphasized its inherent powers to order the sale of the company's properties, even during the pendency of the winding-up petition. The court referred to various provisions of the Companies Act, 1956, and relevant case law to support its jurisdiction to order the sale. The court also highlighted the necessity of involving the official liquidator in the sale process and ensuring the protection of the interests of all creditors.

Conclusion:
The court allowed the application for the sale of the assets, directing the official liquidator to effect publication for the sale, with specific instructions on the process and timelines. The applications for exclusion of specific assets and interim measures pending arbitration were dismissed, with directions for the applicants to lodge their claims with the official liquidator. The objections raised by the respondents were found to be unsustainable, and the court emphasized the need to proceed with the sale to protect the interests of the creditors and ensure the proper administration of the company's assets.

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